DON`T UNPLUG EDISON IN CHICAGO

CHICAGO TRIBUNE

In any contract negotiation, sometimes the most important moves are made before anyone sits down to talk. Commonwealth Edison Co.`s 39-year-old agreement to provide electricity to Chicago doesn`t expire for another three years, but already the two sides are maneuvering to gain an edge.

Mayor Washington says he wants to buy part of the utility in order to provide cheaper electricity than Chicago residents can get from Edison. The thought of this city administration, or any future one, managing a complex electric system that delivers the power critical to daily commerce and living is mind-boggling. Before laughing it off, however, consider that the mayor has spent $75,000 on a study that shows how electric bills could be shaved, and he wants to spend several times that amount next year to further investigate the ''municipalization'' of some of Edison`s system.

The study, done by a Seattle-based engineering firm, contends that city residents could save up to $18 billion over 20 years if Chicago were to buy part of Edison for $1.3 billion to $6.5 billion. Such numbers are compelling to residents who have seen their electricity bills soar in recent years and to a mayor who could create a new city lighting department and pack it with thousands of patronage jobs.

Power systems owned by local governments serve nearly 14 percent of America`s electric consumers and are a viable alternative to investor-owned utilities in many communities. But in Chicago, the idea of a municipal utility makes sense only as a bargaining ploy. In this town, the risks of unplugging Edison outweigh any potential benefits. Here are a few reasons why:

- The takeover process would stretch out for years and be expensive, with consultants` and lawyers` fees alone costing taxpayers millions. Edison would not allow the city to seize a third of its system without fair compensation. The question of value would surely end up in the courts, and chances are good that the city would end up paying much more than it expects.

- Most successful municipal utilities were started early in the century and have access to low-cost power such as hydro-generated electricity. If Chicago chose to buy Edison`s property within the city limits, it would get a distribution system and two aging coal-fired plants. If it opted to take only the distribution network, the city would have to purchase electricity competitively on the open market. Currently, there is excess generating capacity in the Midwest, but that isn`t guaranteed to continue into the 21st Century. Then, Chicago would be faced with building its own costly generating facilities or trying to buy marginal electricity at much higher prices.

- The city would finance the Edison purchase by issuing tax-free revenue bonds. These would be secured by revenues of the city power department, which would pay interest to bondholders and pass that cost on to city taxpayers. The city would have to go heavily into debt to buy an electric system that is already serving its residents reliably, and taxpayers would be paying for a system that they already have financed through their Edison bills. In addition, the city`s ability to raise money for essential projects such as road repairs, transportation and neighborhood renewal would be limited by its huge indebtedness for public power.

- Municipal power rates are subject to the same inflationary and interest-rate pressures as investor-owned utility rates. Undoubtedly, the time would come when the city wanted to raise rates. Free from state regulatory oversight, bureaucrats and political pressures would largely determine spending and rate structure. In a city where the administration has not been able to run its public housing or its schools efficiently and the mayor wants to add 1,700 persons to city payrolls and boost property taxes, it doesn`t make sense to put electric bills in the hands of a mostly self-regulated city department and trust it to manage what still would be one of the nation`s largest utilities.

Big monopoly utilities, particularly ones committed to nuclear power, make inviting political targets. That`s why governments in New Orleans and Long Island are also looking at municipal ownership of power companies. But a large electric system hasn`t been taken over in this country since the `40s, and Chicago is the wrong city to try.

Get the best deal you can on a new city franchise agreement with Edison, Mr. Mayor, but please don`t try to run a giant electric company.